Strong unofficial housing sector and consumer confidence data helped the Australian sharemarket finish ahead on Tuesday, despite some heavy losses in QBE Insurance and ALS Ltd as company reporting season continued with more disappointing news.

The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each added 0.2 per cent, on Tuesday to 5588.4 points and 5580.6 points respectively. Gains in the big four banks, Telstra, and the biggest supermarkets led the index.

QBE Insurance Group was the heaviest weight on the local bourse, as it dropped 11.1 per cent to its lowest value in more than six months at $10.57 after warning current half-year results will take a hit from the need to set aside an extra $170 million for claims from its Latin American business.

There are more than 100 million people living in his home province of Guangdong who eat about 12 million tonnes of grains year. But the demand for cereal is far greater - about two times as much as the province feeds livestock and for other industrial uses.

And this is where Australia comes in. The country exports about 26 million tonnes of grain a year, enough to meet the total demand of Guangdong.

Mr Zhu's comments came a day after the Business Council of Australia urged Australian governments to rethink their role in the economy by promoting industries that have natural advantages such as agriculture.

Some analysis from BusinessDay columnist Elizabeth Knight on the telco wars:

Australia’s number three mobile phone carrier, Vodafone, made a pretty ambitious statement on Tuesday about its 4G coverage: that it would be as – or even more – extensive than that of Telstra in capital cities by the end of the calendar year and significantly ahead of Optus.

This coverage leapfrog should put the trouble-plagued carrier in a far better position to compete with its two major rivals. But having a quality product or service at an attractive price is not always a guarantee of success.

Indeed, both Vodafone and Optus have been improving their respective networks for the past couple of years, but convincing the consumers has proven difficult – an issue that has played beautifully into the hands of Telstra, which has continued to increase its market share despite being more expensive than its rivals.

There are signs home ownership could get more affordable, as lower interest rates, increased construction activity and a growing population threaten to stabilise property prices and rental income.

According to National Australia Bank data, Australia’s population growth has surged in recent years, helped mainly by growing migration. This has provided an added boost to construction in a low interest rate environment.

Growth in rental accommodation has slowed over the past year, and appears to be facing a further decline.

“A better balance should eventually also show up via a slowdown in house price appreciation,” said NAB global head of research Peter Jolly.

QBE's credit rating won't be affected by today's downgrade, says S&P. "While the expected earnings for interim 2014 are slightly credit negative, they can be accommodated at the current rating and do not represent a downgrade trigger event under our existing negative outlook."

The strong performance of its Australian business and return to profitability in North America counter the surprise weakness from Latin America.

4:10pm on 29 Jul 2014

The S&P/ASX 200 Index has closed 0.2 per cent higher to 5590.6 points, snapping a two day losing streak.

Winners and losers at the close

3:45pm on 29 Jul 2014

Argo Investments senior investment officer Chris Hall said that while he was disappointed to see QBE surprise the market with another downgrade he is hopeful the worst is now over leaving the stock poised to re-rate over time against an improving macro-economic backdrop, particularly in the U.S.

“As long as there are no more operational blow-outs, rising US interest rates should help drive earnings growth and help the stock recover over the next couple of years,” he said.

Mr Hall said the company has been conscientious in completing the actuarial review and disclosing the information to the market, and that the write-down was not serious enough put it at risk of needing to raise more capital.

3:34pm on 29 Jul 2014

ALS is having a bad session, down around 5 per cent. Patersons says the market does not like profit guidance of $74 million which would represent a one-quarter fall in underlying net profit over the previous corresponding period.

The geochemical and energy businesses are doing it the toughest because of market conditions.

3:01pm on 29 Jul 2014

Bank of America-Merrill Lynch analyst David Errington has done some profound research on the significance of cost cutting and finds that cost cutting often reduces a company’s ability to grow.

"We believe that good cost control and discipline is the cornerstone of a strong company. However, our point is that when cost outs become the main focus of a company, and when they (cost outs) become the driving/underlying force of earnings growth for that company, more likely than not (in our experience) that company will go backwards in terms of its ability to grow future earnings," he says.

Now, Errington is not an equity strategist, he is an analyst with specialist knowledge of the consumer sector so the following is not an all-encompassing list.

"There are two stand out businesses in our coverage that are currently growing sales – Bunnings (Wesfarmers) and JB Hi Fi... Companies that have followed cost reduction strategies that we believe have seemingly compromised their businesses (both past and present) include (not an exhaustive list) Myer, PacBrands, Goodman Fielder, Coke Amatil, Wesfarmers (industrial businesses), Coles (pre Wesfarmers), Foster’s, and Treasury Wine."

Costs are critical: but consumer companies are especially sensitive to a singular focus on costs Back to top

2:35pm on 29 Jul 2014

Bluestone Global is in a trading halt ahead of an announcement on its progress with shareholders around the company's funding needs.

And so is Namibian Copper which is readying to release something on a capital raising.

2:33pm on 29 Jul 2014

Fonterra Co-operative Group has cut its farmgate milk price forecast to $NZ6/kg from $NZ7/kg for 2014-15 and a dividend somewhere between 20 cents and 25 cents a share. Global dairy prices have declined 16 per cent since June 1.

“We have seen strong production globally, a build-up of inventory in China, and falling demand in some emerging markets in response to high dairy commodity prices. In addition, the New Zealand dollar has remained strong," said chairman John Wilson.

2:14pm on 29 Jul 2014

The latest economic data shows business confidence is the new drag.

Business confidence among Australia’s largest listed firms has fallen sharply over the June quarter, undermined by the tight federal budget and coinciding with a reluctance to spend.

The outcome is at odds with a separate report from ANZ-Roy Morgan that indicates consumer confidence has finally recovered from the blow dealt by the Treasurer’s fiscal consolidation.

According to National Australia Bank’s quarterly ASX300 business confidence survey, which records the top 200 Australian stocks, plus the top 100 small caps, confidence has fallen to +3 points from +11, a decrease of 9 points. General business confidence is +4 points.

Export sales came off 2 points to +5 points due to the high Australian dollar, but still remains at elevated levels, the report said.

Some sharp analysis from BusinessDay columnist Malcolm Maiden on the QBE fiasco:

"The problem with repeatedly setting targets and missing them is painfully obvious to QBE chief John Neal.

QBE was expected to post a net profit of about $535 million in the June half. After the latest downgrades that Neal has announced, the group says a net profit of $390 million is likely. The difference is $145 million, or just over 11 cents a share, but at lunchtime QBE's shares were down $1.30, almost 11 per cent.

QBE, like all companies, trades on a multiple of its earnings, but that only explains about half the decline. The rest is a confidence hit, taken because QBE keeps on blind-siding its shareholders.

Neal would only say that the group's dividend policy was unchanged at the briefing he held to explain the earnings guidance downgrade."

Explosive report from Jacob Greber over at The Australian Financial Review. He reveals Australia must keep total government debt below 30 per cent to maintain its triple-A rating with Standard & Poor's, the first time S&P's target has been revealed.

The Reserve Bank may be forced to cut the official cash rate before the end of the year to beat back of a wall of foreign money that has driven the Australian dollar higher, according to Goldman Sachs Asset Management’s bond expert Phil Moffitt.

Moffitt, a 30 year veteran of the bond market and one of Goldman’s most senior Australian partners was speaking at the sidelines of the $935 billion asset managers’ client conference in Sydney.

He said the confluence of weak domestic growth, an expected fall in inflation as the carbon tax is discarded and the high currency was pointing towards a potential cut in the official rate cut below its current 2.50 per cent setting.

“The game plan has been the RBA to hold rates stable, and accept the currency is overvalued, in anticipation of the Fed moving [to lift US interest rates],” he said.

Here's CommSec's take on the positive consumer confidence number and housing stats:

This should translate to an uptick in retail spending. CommSec expects the Reserve Bank to wait to February to start the “normalisation” process for interest rates, but can’t completely rule out a rate hike in December.

"Homebuilding and home renovations will be the linchpin of the Australian economy growth story over the coming year."

12:46pm on 29 Jul 2014

The willingness of smartphone users to pay bills online has sparked a sudden surge in the use of BPAY’s online billing product, BPAY View – a full 12 years after it was created.

The competition regulator is making enquiries to determine whether Qantas Airways and Virgin Australia Holdings have made misleading statements in relation to their ability to recover the carbon tax.

In its carbon monitoring report for the June quarter, the Australian Competition and Consumer Commission said the airlines had told the regulator they did not expect airfares to fall once the carbon tax was removed because they were unable to pass though the costs to customers.

Qantas had introduced a carbon surcharge on domestic fares in the lead-up to the carbon tax being put in place. It had said fares on Qantas and QantasLink flights would rise by $1.82 to $6.86, depending on the length of the sector.

The surcharge was removed earlier this month, just before the carbon tax was repealed. The airline, however, claimed it was an administrative task and would not impact the final fares being paid by consumers.

Virgin had said tickets would rise by $1.50 to $6 depending on the sector length as a result of the carbon tax, but it later told investors it was unable to recover the carbon tax due to stiff competition in the domestic market which had led to overcapacity and pushed down airfares.

QBE has completed its conference call with analysts and it sounds like the downgrade this morning might not be a massive blow to payout prospects.

The company said it will wait until its formal results announcement Aug 19 to disclose the dividend but for now, it maintains its target for up to 50 per cent of cash profits to be released as dividends.